Slowing smartphone sales cast cloud over Samsung Electronics

Operating profit falls 18% in fourth quarter

The quarterly operating profit for Samsung Electronics, the world’s top maker of smartphones, fell for the first time in two years amid a slowdown in smartphone sales.

The tech giant said on Friday its fourth-quarter earnings in 2013 showed sluggish performance, posting 8.3 trillion won ($7.7 billion), down by 18.2 percent from the previous quarter. This is largely due to weak sales of its information technology and mobile communications division, which saw a 7 percent drop from the previous quarter to 33 trillion won.

“This is caused by a base effect of the high growth of smartphones in the third quarter and inventory adjustment at the end of last year,” a Samsung Electronics official said.

“Though the demand for smartphones in emerging countries is seeing a rise, the competition is getting fierce.”

Despite the drop in the quarterly profit, Samsung Electronics posted a record 228 trillion won in sales last year, up by 13.7 percent from the previous year, topping 200 trillion won for two consecutive years. The company reached 36 trillion won in operating profits, a rise of 26.6 percent from 2012.

On Samsung’s 2014 outlook, analysts forecast another quarterly profit drop in the first quarter due to a fall in sales of smartphones and sluggish demand on parts and television sectors, the company said.

“The tech giant’s earnings, however, will improve from March as Samsung unveils its new models in smartphones and semiconductors,” said Lee Min-hee, an analyst at IM Investment & Securities.

Song Jong-ho, an analyst at KDB Daewoo Securities, said, “Samsung’s 2014 earnings will be largely based on sales of new products like the Galaxy S5, but high earnings will be difficult as the competition rises.”

The company said it would focus on expanding its smartphone portfolio both by region and price range this year, and actively respond to growing Long Term Evolution service demands in Europe and China.

It also aims to hold up solid tablet sales momentum through larger display devices and innovations in user convenience, as it expects the tablet market to grow by more than 20 percent from the previous year.

The demand for its mobile DRAM is expected to gain ground on the back of improved smartphone sales, along with other application processors.

Samsung added that it plans to expand its TV sales with its premium lineups including ultrahigh-definition TVs and curved TVs, and models larger than 60 inches.